Housing Costs Rising All Around, Says Harvard

“Both homeowners and renters are struggling with high housing costs,” says The State of the Nation’s Housing 2024 report by the Joint Center for Housing Studies of Harvard University. Here are some key points from the report.

For-Sale and For-Rent Lacking Affordability

“Lack of affordability defines both the for-sale and the for-rent housing markets,” the report shares. At the end of 2023, home prices were up 5.6% annually, rising at an annual rate of 6.4% in February and hitting an all-time high early this year. Home prices grew in 97 of the top 100 markets, and the Northeast and Midwest saw the greatest growth.

Earlier this year, rent costs grew 0.2% year-over-year, but they remained up 26% nationwide since early 2020. In three out of every five markets, rents are rising – especially in the Midwest and Northeast.

Cost Burdens at Record Highs

“The number of cost-burdened homeowners, those who spend more than 30% of household income on housing and utilities, grew by three million to 19.7 million between 2019 and 2022,” the report notes. Nearly one in four homeowners (23.2%) are now burdened by housing costs, including 27.4% of homeowners 65 and older.

Additionally, half of all renter households (22.4 million) were considered cost-burdened at the last measure in 2022, which was up two million since 2019. Cost burdens were especially high for non-white renter households. Racial demographics for cost-burdened renters are as follows:

• Black: 57%
• Hispanic: 54%
• Multiracial: 50%
• White: 45%
• Asian: 44%

Household Growth High

“Despite high housing costs, household growth remained robust through last year,” the report says. “The nation gained 1.7 million households between 2022 and 2023, according to the Housing Vacancy Survey.”

Gen Zers and millennials forming their own households have increased this number, as well as baby boomers increasing the number of older households. Immigration, which peaked at 3.3 million in 2023, has also contributed to household growth nationwide.

More New Units Cool Rental Market

Although rent expenses are increasing, the country is seeing more rental units coming onto the market. The report says, “Multifamily completions rose by 22% to 449,900 in 2023, the highest annual level in more than three decades, and the number of units under construction in March 2024 remained near the record high. As these units have come online, they have outnumbered even sizeable increases in new renter households, and so the rental market has cooled slightly.”

Low For-Sale Inventories

For aspiring homebuyers, inventory has been more challenging. “Existing homes for sale remain in short supply,” the report notes. “Just 1.1 million homes were available for purchase in March 2024, down from 1.7 million in March 2019, according to the National Association of Realtors®.”

The lack of existing homes for sale has encouraged aspiring homebuyers to turn to new home construction, which increased by 4% in 2023 and accounted for 15% of all single-family home sales, compared to 12% just two years earlier.

Narrowing Racial Homeownership Gaps

Higher homebuying costs have slowed the close of racial homeownership gaps. This is especially true for the Black and Hispanic homeownership rates (46.6% and 49.9%, respectively, in comparison to the white homeownership rate of 74.0%). While these two demographics saw an increase in homeownership before and throughout the pandemic, high home prices since have priced out many Black and Hispanic renter households, preventing them from becoming homeowners.

Climate Change’s Threat to Housing Stock

“The housing stock is increasingly at risk of damage from severe hazards,” the report notes. “The number of billion-dollar disasters related to climate change has grown from an annual average of three in the 19080s to 28 in 2023 alone. At last count, 60.5 million housing units were located in areas with at least moderate risk, according to the Federal Emergency Management Agency.”

Predicted Outlook

The Joint Center for Housing Studies of Harvard University predicts that housing costs are likely to remain high, with home prices set to rise due to highly limited supply. However, they believe there may be some affordability gains in the rental market soon with more rental units coming onto the market. Still, this may not last long, as new construction rates are dropping. In addition to housing costs, climate change will persist as a growing threat to the nation’s housing stock.